arco: Cleanup almost skirted - Attorneys: Grupo - Amarillo Globe-News
(TX) - December 30, 2009
December 30, 2009   Amarillo Globe-News (TX)   Les Blumenthal

WASHINGT ON - A 562-foot smokestack that spewed a plume of arsenic, lead and other heavy
metals across 1,000 square miles of Washington state's Puget Sound for about a century remains
a fitting symbol of the largest environmental bankruptcy in U.S. history.
$52 million to T exas to clean up sites
Asarco is providing T exas with about $52 million that will be placed in a trust to oversee cleanup at
the former Asarco smelter in El Paso. A small portion of the state's settlement, about $80,000, will
be used the maintain the former Amarillo smelter site, at Smelter Road and Northwest 20th
Avenue.
Several years ago, Asarco finished a voluntary cleanup at the 100-acre site, which was covered
with a layer of soil and seeded with native grasses. In 1992, Asarco reached an out-of-court
settlement in a federal lawsuit regarding emissions from the Amarillo smelter. Several Amarillo
plaintiffs, including residents from Amarillo's North Heights, alleged they suffered health effects
from smelter emissions, but Asarco denied that emissions caused the plaintiffs' health problems.
T he former smelter closed in 1975 and later was razed.
But it also tells a cautionary tale of how a company that is intent on shedding its environmental
liabilities could manipulate the nation's bankruptcy system.
In this instance, Grupo Mexico, S.A. de C.V., tried and failed, according to lawyers and regulators
who are close to the case. It took a federal judge, though, to block what some bankruptcy
attorneys call a "candy heist" that could have left taxpayers responsible for cleaning up 80 polluted
sites in 19 states, a job that initially was estimated to cost $6.5 billion.
T he smokestack in Ruston, Wash., once the world's biggest, has been demolished, as has the
copper smelter that fed it. T he smelter was owned by Asarco , a century-old mining, smelting and
refining company based in T ucson, Ariz., that once was listed on the Fortune 500. Grupo Mexico
bought Asarco in 1999.
In court documents, Grupo Mexico has denied that it maneuvered Asarco into bankruptcy in an
attempt to evade its environmental responsibilities. Grupo Mexico refused to comment for this
story.
"Grupo Mexico tried to use a bankruptcy court to avoid Asarco 's cleanup responsibilities, and they
almost got away with it," charged Sen. Maria Cantwell, D-Wash.
Asarco officially emerged from bankruptcy earlier this month, and Grupo Mexico has paid $1.8

 billion in cleanup costs. In addition to claims filed by the federal Environmental Protection Agency,
15 states, including T exas, Washington, Oklahoma, Missouri, Colorado, Arizona and New Mexico,
and various Indian tribes and private parties had filed environmental claims against Asarco .
State and federal regulators say they're more than satisfied.
But unless the laws are changed, Cantwell and others said that another company almost certainly
will try to manipulate the bankruptcy system the way they charge that Grupo Mexico did.
"T his is not what the bankruptcy laws were intended for," said John Iani, a Seattle attorney who as a
regional head of the Environmental Protection Agency during the George W. Bush administration
convinced reluctant Justice Department lawyers that Grupo Mexico was trying to pull a fast one.
Asarco had seen better years when Grupo Mexico bought it for more than $2 billion in a highly
leveraged buyout. Owned by one of Mexico's richest families, Grupo Mexico had its eyes on
Asarco 's "crown jewels," a majority interest in two of the world's richest copper mines, in a
Peruvian desert where it hadn't rained since the time of the Spanish conquistadors.
From the get-go, Iani and other regulators smelled trouble. T hey were convinced that Grupo
Mexico's sole goal was to gain control of the Peruvian mines and then nudge Asarco into
bankruptcy to avoid billions of dollars in environmental cleanup costs.
"We watched as their lawyers sought to move things offshore," Iani said. "T hey were leaving the
country, and these sites would have gone orphan."
Federal attorneys were able to block the transfer of the Peruvian mines to another of Group
Mexico's subsidiaries temporarily. In 2003, though, Grupo Mexico officially bought the mines from
Asarco . Less than two years later, Asarco filed for bankruptcy protection.
During the past four years, the case has unfolded in a bankruptcy court in Corpus Christi. Early on,
Judge Richard Schmidt effectively stripped Grupo Mexico of its control of Asarco and installed an
independent board of directors.
Grupo Mexico continued to play a role in the bankruptcy proceedings, but it was unclear how
serious it was about reassuming control of Asarco in a reorganization.
While the case was proceeding in Corpus Christi, a separate case was filed in a federal court in
Brownsville. In that case, Asarco alleged that Grupo Mexico fraudulently had stripped it of its
interest in the Peruvian mines and taken steps to force it into bankruptcy.
In a stern decision, U.S. District Judge Andrew Hanen agreed and found that Grupo Mexico owed
Asarco $8.8 billion for the mines.
Grupo Mexico either would owe $8.8 billion to a new owner of Asarco under a reorganization plan,
or it could fight to regain control of Asarco for far less.
"In a status conference just weeks before Hanen's ruling, Grupo Mexico said it wasn't interested in

 buying Asarco ," said Elliott Furst, who handled the case as a senior counsel in the Washington
State Office of the Attorney General.
But within weeks of Hanen's ruling, Grupo Mexico was in a bidding war for control of Asarco .
Copyrig ht 2009 Amarillo Globe-News